Three years ago, COVID-19 lockdowns meant a dramatic decline in credit card spending. Balances fell to $750 billion in 2021; however, the latest reports show that debt has rapidly increased since then and is now approaching $2 trillion.
A new report from the St. Louis Federal Reserve Bank shows balances on credit cards and other revolving credit products close to $1 trillion. This increase is mostly being blamed on high inflation and job losses, which have reversed the trend seen in the pandemic.
Consumers have added close to $250 billion to their credit card balances in a two-year period and, to make matters worse, the Federal Reserve is now trying to use more interest rate rises to reduce inflation. So, far, higher interest rates have meant a rise in the average credit card rate.
In fact, the average consumer is now paying an interest rate of 24%, which is the highest since the 1980s. More people than ever struggling to pay back their credit card debts, which can be challenging. But, there are some ways to reduce debts.
According to personal finance author Andrea Woroch: “If you’re struggling to pay down your balance, use a 0% balance transfer card to save on interest. This will buy you more time to pay off your balance without interest piling up and could save you a lot of money and give you relief in your monthly budget to afford higher prices.”
Some other options include:
- Use a personal loan to pay off credit card balances, as they tend to have lower interest rates than the average credit card.
- Speak to the credit card company and set up a repayment plan.
- If you have multiple debts, always try to pay off the most expensive ones first.
- Create a budget and see if you can cut back on any other monthly expenses.
- Consider using savings to pay off some of your outstanding debts.
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